The Costliest Mistake In All Of Economicshttp://www.businessinsider.com/the-costly-misplaced-worry-about-the-deficit-2011-10/comments
en-usWed, 31 Dec 1969 19:00:00 -0500Sun, 02 Aug 2015 14:46:29 -0400Joe Weisenthalhttp://www.businessinsider.com/c/4ea1b54becad04701000000cJohn ZelnickerFri, 21 Oct 2011 14:09:15 -0400http://www.businessinsider.com/c/4ea1b54becad04701000000c
rocksolidtruth -- Oops. I guess I should have read further than your first posting. Glad to see someone is here trying to get the truth out.http://www.businessinsider.com/c/4ea1b30f6bb3f7ca03000004John ZelnickerFri, 21 Oct 2011 13:59:43 -0400http://www.businessinsider.com/c/4ea1b30f6bb3f7ca03000004
rocksolidtruth -- You've almost got the whole thing right. Check out the blog of the economics department at the Univ of Missouri - Kansas City: <a href="http://neweconomicperspectives.blogspot.com/" target="_blank">http://neweconomicperspectives.blogspot.com/</a> as well as moslereconomics.com for information about Modern Monetary Theory (MMT) which will help fill in the blanks for you. Also, <a href="http://bilbo.economicoutlook.net/blog/" target="_blank">http://bilbo.economicoutlook.net/blog/</a> is a great source for MMT learning and analysis of what's happening in the world. BTW, the total National Debt(accumulated deficits) is equal to the Net Savings of the non-government sector to the penny.http://www.businessinsider.com/c/4e9c7aedeab8ea7c7a000035PeterUKMon, 17 Oct 2011 14:58:53 -0400http://www.businessinsider.com/c/4e9c7aedeab8ea7c7a000035
A basket of currencies (SDR like) or mid-term/long-term the euro if European governments manage to save the euro. The European economy is already bigger than that of the United States and Europe as a whole has a substantially lower debt level. And if the euro survives, the eurozone is going to expand with new member states. Also, unlike the Federal Reserve, the ECB is a central bank that adheres to the sound money principles of the German Bundesbank. They're staunchly against quantitative easing and very conservative with interest rates. These things together make the euro attractive, and it's not without reason that the euro is 37% stronger than the dollar. Really, the only thing missing is fiscal unity and that's exactly what Europeans are working on now.
Note, Saddam Hussein asked euros for oil and we all know what happened:
<a href="http://www.guardian.co.uk/business/2003/feb/16/iraq.theeuro" target="_blank">http://www.guardian.co.uk/business/2003/feb/16/iraq.theeuro</a>
Iran is in the process of developing a euro denominated oil bourse and was isolated immediately:
<a href="http://en.wikipedia.org/wiki/Iranian_oil_bourse" target="_blank">http://en.wikipedia.org/wiki/Iranian_oil_bourse</a>
Same is true for Venezuela, it wants to drop the dollar and all of sudden, they're isolated:
<a href="http://news.bbc.co.uk/2/hi/business/6202791.stm" target="_blank">http://news.bbc.co.uk/2/hi/business/6202791.stm</a>
Obviously, if enough OPEC members ask euros instead of dollars, it will end the reserve currency status of the dollar. You'll get a dollar crisis if oil is no longer traded in dollars (exclusively).http://www.businessinsider.com/c/4e9c63b8eab8ea8d59000028black swanMon, 17 Oct 2011 13:19:52 -0400http://www.businessinsider.com/c/4e9c63b8eab8ea8d59000028
"a. it hasn't happened"
Next time, make it a little less simple, and supply an anticedent.http://www.businessinsider.com/c/4e9c6327eab8ea8d59000023black swanMon, 17 Oct 2011 13:17:27 -0400http://www.businessinsider.com/c/4e9c6327eab8ea8d59000023
"He almost went broke because he went long gold because he thought the war would go for a long-time and therefore gold would be in great demand to pay the troops"
How ironic that the Rothschilds exited the LBMA in 2004 and dumped their gold at exactly the wrong time. This time they missed the biggest gold bull market ever. It's time to find new boogeymen with a little more mental acuity and less inbreeding. .http://www.businessinsider.com/c/4e9c55726bb3f7ad5200002crocksolidtruthMon, 17 Oct 2011 12:18:58 -0400http://www.businessinsider.com/c/4e9c55726bb3f7ad5200002c
Yes ...I am a beleiver in MMT. But not an apostle. The reason there is such animosity toward it....is because the experts in the field are all the same 1% that is getting bashed right now.
Understanding MMT, which I didn't until shortly before the crisis in 2007....turned me from an average Joe into a 2 figure millionaire.
I try to quell my guilt from how fast things turned around in my life by giving the vast majority of my earnings now to foundations. I have a nice spread on Lake Huron and the money to live and love comfortably till death. So I will give all future profits away.....I have no children. This year's after tax income will go directly to the Clinton Foundation.
Anyhow.....no matter what your income level....understanding MMT is essential to understanding what is actually happenning in the world right now.
I do not say that you need to believe it as truth.......but the Fed is operating under this theory...regardless of what theory you want to believe and follow.
So if you are an investor you must play the game the Fed is playing....not the game that public opinion and belief is playing. These two operating methods are miles apart.
Warren Buffet is one of the best players in the MMT Fed game.
Timmie and Bennie know that the vast majority of Americans are completely oblivious to the true system that is operating.....and are very content to keep it that way..
One of the best ways to get a grasp of MMT is the Cullen Roche paper available here. Cullen is another great contributor on BI:
<a href="http://pragcap.com/resources/understanding-modern-monetary-system" target="_blank">http://pragcap.com/resources/understanding-modern-monetary-system</a>http://www.businessinsider.com/c/4e9c453eecad04f344000039nickoMon, 17 Oct 2011 11:09:50 -0400http://www.businessinsider.com/c/4e9c453eecad04f344000039
Couldn't have said it better myself. As bad as it is in the States, its about to get MUCH worse in developing markets.http://www.businessinsider.com/c/4e9c452c6bb3f7f53d000020MajorMon, 17 Oct 2011 11:09:32 -0400http://www.businessinsider.com/c/4e9c452c6bb3f7f53d000020
"like all Americans completely miss the point"
Thanks. You could have saved us both some time by simply declaring yourself, at the onset, as an MMT apostle -- I've read it before and would have understood your position immediately. And yes, once you agree with the premises that MMT requires as articles of faith (I don't) the rest of it follows. We're done.http://www.businessinsider.com/c/4e9c437e6bb3f7de3b000013badbobMon, 17 Oct 2011 11:02:22 -0400http://www.businessinsider.com/c/4e9c437e6bb3f7de3b000013
And what currency would replace the Dollar as the reserve currency? The Chinese Yuan? Don't forget China pegs it to the Dollar. What the BRIC say and do are 2 different things.http://www.businessinsider.com/c/4e9c42d369beddd06a000012badbobMon, 17 Oct 2011 10:59:31 -0400http://www.businessinsider.com/c/4e9c42d369beddd06a000012
So tell me the last time when Zimbabwi's currency was considered a global currency? It's not the same thing.http://www.businessinsider.com/c/4e9c39c56bb3f72327000016rocksolidtruthMon, 17 Oct 2011 10:20:53 -0400http://www.businessinsider.com/c/4e9c39c56bb3f72327000016
Like I said....most Americans have a misplaced belief of the Federal Reserve system.....you included. You are saying that if I earn 10,000 and put it in my Wells Fargo account that I am loaning Wells Fargo money and they now owe it to me plus interest.......that it is a debt by Wells Fargo......not a savings account for me. Which is exactly what the managers of state want you to believe. And it has successfully imprinted upon you. This is a remnant belief from the days of the Gold Standard….which is dead and buried.
You, like all Americans completely miss the point. In a loan money is given you with a promise to pay it back.......you have to earn money to pay it back. With a savings account...you give your hard earned dollars to a bank and they are parked there until you retrieve them. They promise to keep them in safe keeping for you until you "redeem" them.
Your erroneous view of the Federal Reserve system, your programmed belief...... is that when you put your paycheck in the bank.....the bank "owes you money"...that it is loan to the bank......the fact is that money is parked at the Fed waiting for you to ask for it. Same as a treasury bill.
Your belief is false. And belief drives people's choices.
For a really great understanding of the Federal Reserve system....please read Cullen Roche's paper, first introduced right here on Business Insider:
<a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625" target="_blank">http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625</a>http://www.businessinsider.com/c/4e9c2d08eab8ea687400002bDarkMathMon, 17 Oct 2011 09:26:32 -0400http://www.businessinsider.com/c/4e9c2d08eab8ea687400002b
Yeah Bill Gross did screw up, he really should have bought Gold but he can't. At least then he'd be even instead of down. Also Gold can go to infinity but treasuries can't go to zero. Gold CAN'T go to zero either....this is pretty much the bottom for Gold. This is a bad as it's going to get. Zero interest rates said so.http://www.businessinsider.com/c/4e9c264169bedd7a3200001fhoppers13Mon, 17 Oct 2011 08:57:37 -0400http://www.businessinsider.com/c/4e9c264169bedd7a3200001f
Look, tomorrow is going to snow! What it' didn't, but it will the 27th December? You see, i'm not wrong , I'm just early! So next time you want a weather forecast, come ask mehttp://www.businessinsider.com/c/4e9c2425eab8ea097000000cDean WormerMon, 17 Oct 2011 08:48:37 -0400http://www.businessinsider.com/c/4e9c2425eab8ea097000000c
There is simply no way that we are going to see any kind of inflationary problem for at least the next two years perhaps very much longer. This is what Bernanke has known from the get go. We are up against unheard of crushing debt deleveraging huge over supply of labor and capacity.
You need look no further than the last two years of stimulus to see the proof.
Despite giving free money to the banks they still can barely work their way out of the problem. Why? Because they don't want to lend? That makes no sense. What company doesn't want more business? No they CAN'T lend. There are no borrowers!
Names me the single most out of demand out of style unwanted product you can think of. Got it.?
DEBT. NO one wants more debt. We've got enough. Banking is a business that is going to suck for the foreseebale future. Unless of course you are a primary dealer for the Fed.http://www.businessinsider.com/c/4e9c21b469bedd2f2e000003Beltway GregMon, 17 Oct 2011 08:38:12 -0400http://www.businessinsider.com/c/4e9c21b469bedd2f2e000003
Sure, probably Acapulco Gold. To quote Cheech Marin and Tommy Chong: "No stems no seeds that you don't need, Acapulco Gold is a bad a@@ weed."
And whatever happened to Rae Dawn Chong? She was HAWT.http://www.businessinsider.com/c/4e9c177d69bedd021a00000cTedMon, 17 Oct 2011 07:54:37 -0400http://www.businessinsider.com/c/4e9c177d69bedd021a00000c
Look at all of this authors articles.
He has something against Bill Gross.
Joe is a joke.http://www.businessinsider.com/c/4e9c111eecad041d6500002arealseal62Mon, 17 Oct 2011 07:27:26 -0400http://www.businessinsider.com/c/4e9c111eecad041d6500002a
i think rock creek has gold in ithttp://www.businessinsider.com/c/4e9c1056ecad04e46300002bDarkMathMon, 17 Oct 2011 07:24:06 -0400http://www.businessinsider.com/c/4e9c1056ecad04e46300002b
Of course we can't go bankrupt, that's not the point. I'm using a metaphor to compare our country to someone who maxes out their credit card before they go bankrupt.
WE'RE DOING THE EXACT SAME THING. (and you know what, I'm OK with that because if I was going to go bankrupt I'd do the same damn thing, in for a penny in for a pound).
Except instead of bankruptcy protection the dollar will lose it's reserve currency status. No, it won't happen tomorrow. My bet is sometime in the next 10-15 years the world wakes up to the Ponzi scheme we have going on. That's all....Bill Gross isn't wrong he's just early.http://www.businessinsider.com/c/4e9bdc69eab8ea205e000043MajorMon, 17 Oct 2011 03:42:33 -0400http://www.businessinsider.com/c/4e9bdc69eab8ea205e000043
"Everyone thinks that a treasury bill is a debt we owe"
T bills, I believe, are (nominally at least) IOU's that promise repayment of money lent to our Federal Government by the purchasing entity. That the money lent is "only" fiat money doesn't change the basic relationship between lender and borrower. The fiat money handed over is another kind of "note" that entitles its holder to a corresponding value of U.S. goods, services or tax obligation settlement.
Unless you believe that the U.S. the goods, services or tax settlements that fiat can be redeemed for are worthless, you have to acknowledge that a debt (complicated as it is) is incurred
The problem of inflation arises when the FED monetizes that debt -- in effect issuing 'vouchers' that are redeemable for goods, services or tax settlements that cost the FED nothing but have a real cost to the providers of those goods, services or tax settlements,
The resulting inflation of fiat from debt monetization means that creditors/lenders are repaid with fiat that has significantly reduced purchasing power to that fiat originally lent. As a sensible consequence, lenders require higher interest to maintain a real return.
There are no free lunches -- even with fiat money.http://www.businessinsider.com/c/4e9bd7e2eab8ea4e62000006Kelly GMon, 17 Oct 2011 03:23:14 -0400http://www.businessinsider.com/c/4e9bd7e2eab8ea4e62000006
All you need to know is IS/LM . If you don't understand what that means, you should shut up. You have NOTHING useful to add to any discussion of macroeconomic policy.http://www.businessinsider.com/c/4e9bd325ecad04ee64000024S'Mon, 17 Oct 2011 03:03:01 -0400http://www.businessinsider.com/c/4e9bd325ecad04ee64000024
PSLV and PHYS >>> because if the stuff were to ever truly hit you can convert it and cash it in anywhere without the bulk & weight of the physicalhttp://www.businessinsider.com/c/4e9bd2ce6bb3f7fd59000043S'Mon, 17 Oct 2011 03:01:34 -0400http://www.businessinsider.com/c/4e9bd2ce6bb3f7fd59000043
there seems to be a new world paradigm that I hope works better this time around - as long as the dollar can hold on to some form of being the defacto global reserve currency there is a good chance for success.http://www.businessinsider.com/c/4e9bcb9969beddd676000018abmindprofMon, 17 Oct 2011 02:30:49 -0400http://www.businessinsider.com/c/4e9bcb9969beddd676000018
Is there any way to dollarmayhem's short? Please. I want some easy money, and there's nothing easier than predicting someone with ideological blinders is going to lose money.http://www.businessinsider.com/c/4e9bbab66bb3f7e74b000001lawrence-lugarMon, 17 Oct 2011 01:18:46 -0400http://www.businessinsider.com/c/4e9bbab66bb3f7e74b000001
Bill Gross' performance is gross.http://www.businessinsider.com/c/4e9b93a069beddc914000038NewalgierSun, 16 Oct 2011 22:32:00 -0400http://www.businessinsider.com/c/4e9b93a069beddc914000038
Well done, Joe. This is the smartest post you've done in your time here, and I mean that. In a liquidity trap, the right thing to do is to borrow and put people back to work. Bondholders are giving you their money at 1%, and it's suicide not to take it. The government must be the employer of last resort in a depression, one could argue that it's almost government's core purpose.http://www.businessinsider.com/c/4e9b9361ecad04a010000003Jeremy huffSun, 16 Oct 2011 22:30:57 -0400http://www.businessinsider.com/c/4e9b9361ecad04a010000003
sir, there is no foaming at the mouth, but tested knowledge. There is no arguing here, and again history will have to repeat to remind the basic humans once again their ways, their own redemption, and "we can fix this one" always ends in disaster. Please have enjoy your time in the beltway, and I pray you will really see the game at play. I have a one up. I come in once a week, and then I leave. It's a sacrilege to be around all of our history and monuments, when the city runs amuck with progressives, crony capitalists, and every other souless opportunihttp://www.businessinsider.com/c/4e9b8e6f6bb3f73c6d000022PeterUKSun, 16 Oct 2011 22:09:51 -0400http://www.businessinsider.com/c/4e9b8e6f6bb3f73c6d000022
Forget the Weimar Republic and Zimbabwe, the threat for the United States is losing the dollar as the world's reserve currency. If foreign dollars are dumped in any substantial quantity, you'll get hyperinflation very quickly. And don't say it won't happen. All of the BRIC nations have publicly stated that they no longer want the dollar as the world's reserve currency, and with the Federal Reserve printing money like crazy, they might sell some of their dollar reserves. That in turn could trigger a chain reaction and a dollar crisis.http://www.businessinsider.com/c/4e9b8b5a6bb3f7f86800003aBeltway GregSun, 16 Oct 2011 21:56:42 -0400http://www.businessinsider.com/c/4e9b8b5a6bb3f7f86800003a
Simple answer because:
a. it hasn't happened
b. you cannot predict the outcome if and when it does.
I happen to think it will be better particularly in regard to the price of oil.http://www.businessinsider.com/c/4e9b8aea69beddfe0400000eBeltway GregSun, 16 Oct 2011 21:54:50 -0400http://www.businessinsider.com/c/4e9b8aea69beddfe0400000e
Briefly, I wrote a letter to the editor and received an e-mail back apologizing for the mistake in the article. It bears repeating because it is still circulating to this day and is part of the foundation of anti-semitism. Basically, the Nathan (I think it was Nathan but the story is true), Rothschild, did not profit from the outcome of the French Revolution. The story is told how he had messengers relay the outcome of the Battle of Waterloo to him while he stood stock still at the exchange and bought equities at rock bottom prices. Truth? He almost went broke because he went long gold because he thought the war would go for a long-time and therefore gold would be in great demand to pay the troops. Moral? Even a smart well connected dude in that era almost made the same mistake you're making now. To quote Anne Rice's vampire Lestat: "God is just as dead now as he was during the Black Plague and the Spanish Inquisition." Ideas, good and bad, are like vampires, they're immortal.http://www.businessinsider.com/c/4e9b8a2eecad040e78000020JCFSun, 16 Oct 2011 21:51:42 -0400http://www.businessinsider.com/c/4e9b8a2eecad040e78000020
Govt spending - taxes = investment - savings + exports - imports
Want to cut spending, where is the negative offset on the other side?
Want to increase taxes, how will increases occur on the other side?http://www.businessinsider.com/c/4e9b8965eab8eaef5600001dggmSun, 16 Oct 2011 21:48:21 -0400http://www.businessinsider.com/c/4e9b8965eab8eaef5600001d
Weimar: war debts denominated in foreign currencies leading directly to massive loss of productive capacity when Germany's creditors seized productive assets.
Zimbabwe: foreign currency debts and a massive loss of productive capacity when Mugabe began a program of seizing land from farmers and giving it to unskilled peasants.
Let us know when the US experiences these two specific threats (non-sovereign debts and loss of productive capacity). Until it does our currency will likely remain very stable.http://www.businessinsider.com/c/4e9b861b69beddbd7b000022rocksolidtruthSun, 16 Oct 2011 21:34:19 -0400http://www.businessinsider.com/c/4e9b861b69beddbd7b000022
Major....
The biggest misunderstanding of the American people is that “Selling” Treasury bills puts us in debt……that we are selling a debt. That is false. It is a savings instrument. It must be "bought" with US dollars that you have in hand.
Those dollars are legally acquired through commerce. So when someone buys a treasury...those dollars get "parked” at the Fed as savings until redemption at maturity or by early redemption when the Fed buys off the market. So all the dollars……currently parked at the Fed……in Treasury holdings……is currency NOT IN CIRCULATION.
How did it get into circulation to begin with.....by the US tresury writing checks into the economy (by deficit). GOVT SPENDING. The great continuous Ponzi scheme of deficit fiat systems.
So, you have all these dollars that the banks have parked at the FED….plus all the Treasury holdings.....and all this currency could be circulating in commerce but is not.
The point......the money supply increases, with deficit spending, as the US Treasury spends into the economy.......and since the wealthy hold all the Treasury bills (and China and Japan).......that takes the currency right back out of circulation. Understand ?? So the velocity of money stops. Even though the total money supply is increasing...the amount that is changing hands between businesses and consumers is not increasing. It is this “multiplier” effect of the money moving back and forth through wages and purchases that causes economic growth and increases in standard of living. That has stopped.
This is why with unprecedented QE….and astronomical war spending……and direct cash stimulus……we have still not seen super inflation numbers.
The money is being funneled...by legitimate means (although unequal) to the wealthy (who are the major owners of institutional trading) and they are parking it at the Fed….in Treasury bills. Yields are plunging from the extraordinary demand.
Everyone thinks that a treasury bill is a debt we owe. False. It is a savings account for dollars that were acquired through commerce.
How many $10,000 T bills do you own personally.....or anyone you know ??
Most are owned by bond traders and sovereigns and funds.
This is why it is not counted as savings. Since everyone just assumes that it is a debt.......it is just left alone. It is a false belief that is propagated throughout our psyche.http://www.businessinsider.com/c/4e9b85656bb3f78e6e000001black swanSun, 16 Oct 2011 21:31:17 -0400http://www.businessinsider.com/c/4e9b85656bb3f78e6e000001
"You are wrong."
That is a very compelling and well-documented argument. Have you ever considered writing a column for the Wall Street Journal?http://www.businessinsider.com/c/4e9b81aeeab8ea4d4200002ediscount air jordan shoesSun, 16 Oct 2011 21:15:26 -0400http://www.businessinsider.com/c/4e9b81aeeab8ea4d4200002e
money is dangerhttp://www.businessinsider.com/c/4e9b7cefecad04866100001aDIODE25Sun, 16 Oct 2011 20:55:11 -0400http://www.businessinsider.com/c/4e9b7cefecad04866100001a
Your right all my gold and silver has no value.http://www.businessinsider.com/c/4e9b7bf9ecad047d61000020MajorSun, 16 Oct 2011 20:51:05 -0400http://www.businessinsider.com/c/4e9b7bf9ecad047d61000020
"Right now there is so much SAVING and HOARDING of currency"
If so, it's certainly not showing up in National Savings or in Investment.. <a href="http://research.stlouisfed.org/fredgraph.png?g=14j" target="_blank">http://research.stlouisfed.org/fredgraph.png?g=14j</a>
Where do you think it's all being sequestered, by whom -- and why?http://www.businessinsider.com/c/4e9b733769beddaa52000035BigEdSun, 16 Oct 2011 20:13:43 -0400http://www.businessinsider.com/c/4e9b733769beddaa52000035
"You can't print money forever": Wrong
"We're going to go bankrupt": Wrong again.
This may be news to you but the USA issues its own currency. We are not Greece, or even France. The Fed can do whatever it takes and Bernanke is on record as saying so.
You may not like it, but that is economic and financial reality.http://www.businessinsider.com/c/4e9b7231eab8ea5325000028Beltway GregSun, 16 Oct 2011 20:09:21 -0400http://www.businessinsider.com/c/4e9b7231eab8ea5325000028
When you read what I wrote your eyes glazed over and you started foaming at the mouth.
It was the most significant intellectual exercise you've had in years. I'll be eaten in DC? Well while you're out there in the Heartland John Cougar Mellencamp I wish you all the best of luck dealing with the Mountain Dew swilling meth heads invading your trailer park.http://www.businessinsider.com/c/4e9b71346bb3f7c43d000016Beltway GregSun, 16 Oct 2011 20:05:08 -0400http://www.businessinsider.com/c/4e9b71346bb3f7c43d000016
You are wrong.http://www.businessinsider.com/c/4e9b5f35eab8ea787c000036MelmotteSun, 16 Oct 2011 18:48:21 -0400http://www.businessinsider.com/c/4e9b5f35eab8ea787c000036
Yeah, really. Like the Fed had anything to do with anything. Alan Greenspan was right at every turn. Every. Turn.
It was those greedy fuckers on Wall Street. Everything is down to them. Everything.
Move along folks - nothing to see here.http://www.businessinsider.com/c/4e9b5273eab8ea196c000025I nominate Trickle Down idiocySun, 16 Oct 2011 17:53:55 -0400http://www.businessinsider.com/c/4e9b5273eab8ea196c000025
Magical thinking of the first order.http://www.businessinsider.com/c/4e9b4d12ecad04310200001ejshockSun, 16 Oct 2011 17:30:58 -0400http://www.businessinsider.com/c/4e9b4d12ecad04310200001e
Collectively we all are paying for theses economic mistakes
<a href="http://www.dailyjobcuts.com" target="_blank">http://www.dailyjobcuts.com</a>
.http://www.businessinsider.com/c/4e9b47e269beddfe01000018WinstonSun, 16 Oct 2011 17:08:50 -0400http://www.businessinsider.com/c/4e9b47e269beddfe01000018
"The Costliest Mistake In All Of Economics"
Being a Keynesian.http://www.businessinsider.com/c/4e9b40e269beddfe79000014todddSun, 16 Oct 2011 16:38:58 -0400http://www.businessinsider.com/c/4e9b40e269beddfe79000014
Bonds are in a bubble. It hasn't popped yet. Do a chart of incomes vs. home prices, it looks identical to these charts....until 2008.
Just because something is working contrary to logic doesn't mean it's the new logic. People were buying homes they couldn't afford. It's just a matter of time.http://www.businessinsider.com/c/4e9b409f6bb3f7b16f000006rocksolidtruthSun, 16 Oct 2011 16:37:51 -0400http://www.businessinsider.com/c/4e9b409f6bb3f7b16f000006
Good job Joe
People are starting to get it……but it takes awhile to grasp this stuff.
The deficit is a fictional number that equals the checks written by the US Govt minus all taxes collected. The Fed has nothing to do with the deficit. All the Fed does is move currency in and out of circulation. The US treasury puts (prints) money into circulation by spending (on deficit, if spending more than taxes collected).
But the deficit is not a DEBT number that has to be paid. The only problem with extremely high amounts of currency in circulation is INFLATION.....when many dollars are chasing too few goods and services. Right now we have the exact opposite…..immense idle capacity and plenty of inventory.
So we are at Dead Stop, mid sea, Titanic taking on water.
The US Treasury has to continually raise the debt ceiling to keep going. They just put on a show to keep the lie that the debt ceiling is a debt to be paid....which is a falsehood. But it keeps the population controlled. Fiat systems are really a big Ponzi type model. Right now there is so much SAVING and HOARDING of currency that the velocity(circulation) has come to near zero. This is causing deflation.
We are at the precipice of extreme deflation. The Fed is out of bullets to increase currency circulation. The currency needs to be in the hands of main street driving daily commerce and exchange....but instead it is sitting in the coffers and hoarder chests of the wealthy.
All the QE did was inflate assets...it did not start multiplier currency circulation.
Since everyone is terrified of more deficit....and even more terrified of increased taxes and Volker interest rates if inflation gets out of control.......the leaders will do nothing.
Guess what.......that is exactly the playbook from 1933/1937
And we all know what happened after that.http://www.businessinsider.com/c/4e9b3d84ecad04957400008fSharn cedarSun, 16 Oct 2011 16:24:36 -0400http://www.businessinsider.com/c/4e9b3d84ecad04957400008f
Timing a currency crisis is as difficult as timing the end of a bubble. Bill Gross might be right in the big picture, but his timing was off. That is indeed one of the worst mistakes investors make. Get too excited and pull the trigger before something happens. Same thing with those who sold their gold at 1200 thinking the bubble had peaked. Hyper-inflation happens rather suddenly, based on pressures that have been accumulating, kind of like an earthquake. You want to be hedged against it, but you really can't predict the day or month.http://www.businessinsider.com/c/4e9b3ccb69bedd986c000023todddSun, 16 Oct 2011 16:21:31 -0400http://www.businessinsider.com/c/4e9b3ccb69bedd986c000023
There are plenty of unemployed, college-educated people.
The assumption that the people that are suffering or unemployed are all uneducated peasants is as misguided as the assumption that all the jobs being outsourced are low-skill, menial jobs.
Lawyers, doctors, engineers, high-tech manufacturing, and especially information technology are all being outsourced to other countries.
College isn't saving people from being long-term unemployed. And in some cases it hurts them getting low-skill, low-wage jobs.http://www.businessinsider.com/c/4e9b3caf6bb3f7ad6900000aTrecerSun, 16 Oct 2011 16:21:03 -0400http://www.businessinsider.com/c/4e9b3caf6bb3f7ad6900000a
Short term hysteria is no remedy for long-term troubles. This is a brilliant article, and I've been waiting to see more of this kind of assessment appear in the media.http://www.businessinsider.com/c/4e9b390b69beddd55a000044MikeDSun, 16 Oct 2011 16:05:31 -0400http://www.businessinsider.com/c/4e9b390b69beddd55a000044
That force is a lot less powerful than it was when Albert said that with interest rates where they are. I think he would agree that it is approaching negligible now.http://www.businessinsider.com/c/4e9b37cceab8eaa73e00004dNavoAgSun, 16 Oct 2011 16:00:12 -0400http://www.businessinsider.com/c/4e9b37cceab8eaa73e00004d
Mr. Beltway you show your arrogance and ignorance even in your login name. You wear it as a badge, but the rest of us who see it on here can sum you and your Keynesian, Progressive, H-St/Adams Morgan foolery. You live in Rock Creek park, and you can eat deer. What.....Gold is for the folks in flyover country who will rebuild after the collapse. I'm sorry to say you will either be stabbed, shot, and most likely eaten in Dc.......give me a break man, learn some history. Progressives, have created a mob this century and that mob will make fodder out all of you. Man redeeming man is a joke, and ends up with a hundred million lives dead......http://www.businessinsider.com/c/4e9b36616bb3f71755000048drand02Sun, 16 Oct 2011 15:54:09 -0400http://www.businessinsider.com/c/4e9b36616bb3f71755000048
Don't know why I but I feel someone has to start looking at what government has done to our children and their children. This in my opinion has been governments costliest mistake.
How are they (the young) going to pay for all of our follies? The answer is they are not. They don't want to be be "indentured servants" to anyone. The are realizing that paying gets them nothing. They are rebelling.
Why should they pay for the baby boomers and their parents mistakes?
It has happened so may times in history, we can now see the future. Civil unrest, then revolution, then a new government. It's done peacefully or violently, but either way it's to happen. People just have to get hungry enough and that's happening quickly.http://www.businessinsider.com/c/4e9b32e8ecad04cf5b00001btheanphibianSun, 16 Oct 2011 15:39:20 -0400http://www.businessinsider.com/c/4e9b32e8ecad04cf5b00001b
This article is smack in the middle of what makes modern economics confusing.
I guess what we have to do is go back to the basic principle that all value is relative. But still, I have a very very difficult time assigning the very fundamental properties to simple things like dollars, government debt, and corporate debt. For instance, I think the message is that the dollar:
- is not risky
- will steadily decline in value
The article itself talks about how the value of the dollar compared to everything else in the world has been declining. But yet people want it - evidenced by the interest rates. Government debt is very similar to money itself, and can be a barometer of it. I can only conclude that people still rush to the dollar and debt IN SPITE OF a poor value proposition. The argument would go that almost everything else contains a large amount of risk. Too much risk.
That's the only way I know to read this all. Believe me, I'm confused.http://www.businessinsider.com/c/4e9b2e416bb3f76242000022MajorSun, 16 Oct 2011 15:19:29 -0400http://www.businessinsider.com/c/4e9b2e416bb3f76242000022
OK, what is the explanation?
I,ll give it a shot w/ a couple of items. First. is National Savings -- the real basis for "investment," shown as a percent of GDP.
<a href="http://research.stlouisfed.org/fredgraph.png?g=14j" target="_blank">http://research.stlouisfed.org/fredgraph.png?g=14j</a>
and then there's monetary velocity, expressed as base turns per year -- over enough time to have a bit of historical perspective. Chart below
<a href="http://research.stlouisfed.org/fredgraph.png?g=2O9" target="_blank">http://research.stlouisfed.org/fredgraph.png?g=2O9</a>http://www.businessinsider.com/c/4e9b2e016bb3f7503e000033IvanSun, 16 Oct 2011 15:18:25 -0400http://www.businessinsider.com/c/4e9b2e016bb3f7503e000033
Bill Gross may have been early, but more likely he chose the wrong asset to short. Instead of shunning T-Bonds, the asset class that the Fed was willing and able to manipulate with gusto, he should have been bearish on the US dollar vs non-Euro currencies, where he could avoid the power of the Fed to ruin his macro thesis.http://www.businessinsider.com/c/4e9b2a0decad049f55000002MajorSun, 16 Oct 2011 15:01:33 -0400http://www.businessinsider.com/c/4e9b2a0decad049f55000002
"America is the still the best nation for investors."
First, the reality is that Wall Street has been out of the investment business for some time now -- flash trades are not "investments -- whether separated by milliseconds or weeks.
Second, asset inflation , drivenby hugely inflationary monetary policy simply reflects hedging gains -- not the creation of net-new wealth expected of "investment."
Finally, The fall of the dollars purchasing power makes for a poor comparison with German of Japanese returns -- in money that better keeps its value.http://www.businessinsider.com/c/4e9b250369beddb539000032black swanSun, 16 Oct 2011 14:40:03 -0400http://www.businessinsider.com/c/4e9b250369beddb539000032
"This means that the country that most likely will be able to promise a return on its money, i.e., things, is the one that will be accorded most favored nation status by savers/borrowers in the event of a crisis."
If you are referring to the US, know that the minute an SDR system replaces the USD as the world's reserve currency, there will be a run on US debt. China, Japan and Russia have been fleeing from US debt.
"America is the still the best nation for investors"
No, America has been the best nation for an elite handful of highly leveraged speculators, like John Paulson and the quant boys and carry traders from Goldman Sachs and JPM, who were able to rig the system. When Bear Stearns went down, the US Treasury gave a $30 billion NON-RECOURSE "loan" to JPM and stuck the US taxpayers with the junk (presently imploding) Bear Stearns collateral. Goldman Sachs was given $13 billion in AIG TARP money that it never had to pay back. On the other hand, the real investors (most Americans, States and municipalities that invested their money in pensions) were taken to the cleaners.
America is not the "best nation for investors", it is the best nation for speculators who are able, through accounting tricks, bribery and political power, to rig the game.http://www.businessinsider.com/c/4e9b2334ecad04f43a000019Beltway GregSun, 16 Oct 2011 14:32:20 -0400http://www.businessinsider.com/c/4e9b2334ecad04f43a000019
In its raw form It is abstract and only represents potential. Potential (value added) means what it may become as a product or as a valuation in the future. Go to Home Depot and look at all the lumber and the other things that are used to construct houses. Individually they are relatively cheap but put them together with the other products and the potential increases. Some of that potential increases simply based on the location in which that piece of lumber is sold. It's the same with gold. Gold is a swap play except the driving force behind gold is fear. Take away fear and gold collapses. (fear of hyperinflation/global instability), and the price collapses. In the event of armageddon I'd much rather have a fishing rod or a bow and arrow. I live in DC. Rock Creek Park is overrun with deer. If the world goes to hell I'll eat like a pig and what will you do with gold? Who will you sell it to and what will they do with it? IN the vent of a bad ending governments would confiscate your gold or make it so hard to sell that your holdings, especially if they're paper, might be better used to start a fire. If you hold gold and you've made money cool. But, as the ultimate hedge it is far to dangerous. People are drawn to gold because they think they understand
its intrinsic value. Sorry to say that value, in the event of the magnitude of economic destruction that most holders of gold predict, is zero.http://www.businessinsider.com/c/4e9b21ac69bedd2435000030Primus PilusSun, 16 Oct 2011 14:25:48 -0400http://www.businessinsider.com/c/4e9b21ac69bedd2435000030
OK, what is the explanation? Correlation or inverse correlation between two factors begs more factors in the equation. Introduce inflation and velocity of money and the periods of time when the Fed has been fixing short term interest rates. Volcker jacked rates way up and then later Greenspan and Bernanke have artificially kept the rates low. The value of the dollar and trade deficit needs to be in the picture too.http://www.businessinsider.com/c/4e9b20e7ecad04fd3e000024elmoSun, 16 Oct 2011 14:22:31 -0400http://www.businessinsider.com/c/4e9b20e7ecad04fd3e000024
The chart since 1980 of debt vs interest rates is intriguing, isn't it Joe. We seem to have set financial theory on it's head; more debt, even during a debt crisis means interest rates should decline. If this holds true, it's like a perpetual motion machine, because we can borrow and spend ourselves into nirvana and never face the downside of higher priced debt.
There is a slight glitch there, unfortunately. The debt monetization didn't just start three years ago. It started decades ago. While the fed was driving those interest rates lower and lower, the Japanese central bank was monetizing our debt, in exchange for jobs. Until it blew up their economy in a blaze of real estate hyperinflation. Then the other Asian Tigers monetized our debt, until it blew up their economies in the Asian financial crisis. Then the Chinese monetized our debt, and now it's about to blow up their economy too.
Those dollars are all out there, Joe, sitting frozen in carbonite on the balance sheets of the worlds central banks and a few massive commercials that stand right next to the money printing spigot. The only reason the US economy hasn't imploded long before now is that we exported all our inflation to trading partners and blew them up instead. But now not even the cheapest labor markets in the world can absorb this monetary deluge, so it's all about to come home. Maybe bonds won't crash, maybe central banks will keep buying and the currencies will crash instead. But one or the other is doomed.
But keep listening to Mr. Paul "We need a sovereign debt bubble to replace the housing bubble to replace the tech bubble" Krugman, Joe. That's the ticket to salvation right there.http://www.businessinsider.com/c/4e9b208aecad04d93c00002fAlpha directedSun, 16 Oct 2011 14:20:58 -0400http://www.businessinsider.com/c/4e9b208aecad04d93c00002f
I thought the biggest mistake was not fully embracing the mathematical reality of compounding?
If the average person understood compounding better, the country would be in much better shape.
If he didn't actually say it, he should have...
“The most powerful force in the universe is compound interest”
Albert Einstein. (maybe)http://www.businessinsider.com/c/4e9b2078eab8ea951700002eDIODE25Sun, 16 Oct 2011 14:20:40 -0400http://www.businessinsider.com/c/4e9b2078eab8ea951700002e
I sure do love all my abstract gold and silver.http://www.businessinsider.com/c/4e9b2069eab8ea620f000033Keating WillcoxSun, 16 Oct 2011 14:20:25 -0400http://www.businessinsider.com/c/4e9b2069eab8ea620f000033
I think Darkmath is spot on. Part of the equation is the perception that our country has the will and ability to pull back from an ongoing debt, from 10-15% down to a reasonable 3%. The other part of the equation is that increased automation and productivity have produced some dramatic decreases in the need for employees to make stuff. So, the man-hours needed to make cars, appliances, and small manufactured goods drop, and folks live with more of these cheap goods, even when they earn lower incomes, so the need to purchase new stuff is diminished. So, we never get to the point that we are desperate enough for new stuff, driving up inflation. What is happening is that our country now has two groups, tax producing workers with college degrees, making money, and less educated folks who are stuck unemployed or have lousy careers, the lower 47%, many of whom are single parents, or are poorly paid service workers. After a while, though, the money starts an era of hyperinflation. But not yet.http://www.businessinsider.com/c/4e9b1dc9eab8ea351100002aPhil GrammSun, 16 Oct 2011 14:09:13 -0400http://www.businessinsider.com/c/4e9b1dc9eab8ea351100002a
Deficits don't matter.
This is all Obama's fault.http://www.businessinsider.com/c/4e9b1bfceab8ea3b0d000024Beltway GregSun, 16 Oct 2011 14:01:32 -0400http://www.businessinsider.com/c/4e9b1bfceab8ea3b0d000024
What Gross fails to realize is that money is an abstract. It's not real. It only stands in place of some other thing be that thing more dollars, oil, etc. This means that the country that most likely will be able to promise a return on its money, i.e., things, is the one that will be accorded most favored nation status by savers/borrowers in the event of a crisis. We've seen this time and time again and after 2008 I'm not sure how Gross would've believed, given their short track record, that the other countries would somehow supplant America at the top of the pole? This may change one day but if you truly believe that Brazil and China will be accorded the trust that investors, especially big investors, (governments), want in regard to the safety of their money you'll go broke much sooner rather than later. You can bitch and moan about debt all you want but those are the rules of the game at this point. America is the still the best nation for investors. That may not be saying much but it's the truth.http://www.businessinsider.com/c/4e9b1a5b69bedde732000002DarkMathSun, 16 Oct 2011 13:54:35 -0400http://www.businessinsider.com/c/4e9b1a5b69bedde732000002
Bill Gross isn't wrong, he's just early. You can't print money forever. But you can have a heck of a time before you go bankrupt. We're going to go bankrupt (currency collapse) eventually but there's no need to tell the credit card company that. They'll still lend us money for a while and we can have a heck of a time until then.
Yeah man, party on, pull out the stops on the debt limit baby. Daddy needs a new pair of outboards on his '28 Boston Whaler Outrage.
<a href="http://www.bostonwhaler.com/Page.aspx/pageId/29593/pmid/268445/280-Outrage.aspx" target="_blank">http://www.bostonwhaler.com/Page.aspx/pageId/29593/pmid/268445/280-Outrage.aspx</a>
I see your logic now Joe and I am down with it. I take it all back. Gosh it would really suck if got our fiscal shit together these days. I'd lose my house, damn that would suck.http://www.businessinsider.com/c/4e9b19e8eab8ea5e1500000cMajorSun, 16 Oct 2011 13:52:40 -0400http://www.businessinsider.com/c/4e9b19e8eab8ea5e1500000c
@ Joe "Costliest Mistake In All Of Economics"
That's a bit of an exaggeration Joe. I'd nominate the FED, Wall Street and Congress inspired housing bubble instead.